New Guide Helps Arizona Families Handle Taxes on Inherited Property Press Services

Do You Pay Taxes when You Sell Inherited Property?

Mesa, United States - April 14, 2025 / LifePlan Legal AZ /

Avoid Tax Surprises: Learn About Inherited Property Rules in Queen Creek, Arizona

LifePlan Legal AZ, a trusted estate planning law firm in Gilbert and Mesa, Arizona, has released a new article designed to help local families understand how and when inherited property is taxed. The article, titled “Do You Pay Taxes when You Sell Inherited Property?,” is an educational guide that explains key tax rules, when and how taxes apply, and why the step-up in basis could be a financial lifesaver for heirs.

According to Jake Carlson, Estate Planning Attorney and founder of LifePlan Legal AZ, many families are unaware of the potential tax implications tied to inherited assets, particularly real estate. “One of the biggest surprises people face after inheriting property is learning that they might owe capital gains tax when they sell,” explains Carlson. “The good news is that the step-up in basis rule often eliminates tax liability at the time of inheritance, which is a huge relief for families in Queen Creek.”

Do You Pay Taxes when You Sell Inherited Property?

What Should You Consider When Inheriting Property in Arizona?

Inheriting property is often an emotional and financial turning point. Arizona does not impose an inheritance or estate tax, but that doesn’t mean taxes are completely off the table. The type of property, how it’s titled, and how quickly you decide to sell or keep it can all affect your financial outcome. The new article from LifePlan Legal AZ explains how a property’s value is recalculated at the time of the original owner’s death and what this means for future decisions.

Understanding the fair market value of the property on the date of death is critical. For example, if a Queen Creek resident inherits a home that’s worth significantly more today than when it was purchased, the new owner benefits from a reset in the property’s cost basis. When heirs inherit property, the IRS applies a step-up in basis to the asset, which means that the value of the base price of the asset is reset to the date of inheritance. This rule may protect heirs from paying taxes on years of appreciation that occurred during the original owner’s lifetime depending on how long they own the asset before selling it.

Will You Owe Taxes on Inherited Property?

Generally, you don’t owe taxes simply for inheriting property. There is no federal inheritance tax, and Arizona does not impose a state-level inheritance tax. However, that doesn’t mean inherited property is always tax-free. The article outlines several tax types, including estate taxes and capital gains taxes, and clarifies which may apply depending on the asset type and estate size.

“In most cases, especially for middle-income families in Queen Creek, estate tax is not a concern,” Carlson notes. “But capital gains tax can be, especially when inherited property continues to appreciate in value after being inherited.”

Do You Have to Pay Taxes When Inherited Property Is Sold?

The short answer is: it depends. If the property is sold for more than its fair market value at the time of inheritance, the profit—called a capital gain—is subject to taxation. Thanks to the step-up in basis rule, however, any gains that occurred before the decedent’s death are typically excluded.

For instance, if a person inherits a house worth $600,000 on the date of death and sells it a year later for $650,000, only the $50,000 in post-inheritance appreciation is considered a capital gain. The IRS will require that gain to be reported and taxed. If the house is sold immediately for the same value it was inherited at, there would likely be no taxable gain.

What Are the Benefits of Working with a Tax or Estate Planning Professional?

The article strongly encourages families to work with an estate planning attorney or CPA to understand their options and avoid costly mistakes. While tax laws are complex, a trusted professional can help ensure you comply with IRS rules, minimize your tax burden, and create a strategy that fits your broader financial goals.

“Tax rules can be confusing and stressful during what is already an emotional time,” said Carlson. “Our goal at LifePlan Legal AZ is to empower families with the right knowledge so they can preserve what matters most. Informed decisions today can prevent costly surprises tomorrow.”

In addition to capital gains planning, estate planning professionals can assist with setting up trusts, updating wills, and guiding beneficiaries through probate. These steps can help protect family wealth and ensure a smoother transition for heirs.

About LifePlan Legal AZ: Helping Arizona Families Protect Their Legacy

LifePlan Legal AZ works with individuals, families, and small businesses to prepare today for the unexpected tomorrow through estate planning, trusts, wills, and asset protection. Led by founder and estate planning attorney Jake Carlson, LifePlan Legal AZ is on a mission to help 10,000 Arizona families secure their futures with strategic estate planning. To learn more about the best ways to protect your home and your legacy, LifePlan Legal AZ offers complimentary 30-minute strategy sessions that can be scheduled on their website: https://lifeplanlegalaz.com/schedule-strategy-session/